One key consideration in any decision about the use of the proceeds from the sale of State assets is the potential impact on the General Government Balance, which is calculated in accordance with Eurostat rules on General Government accounting.
Under these rules, cash received by the Exchequer from the sale of State assets is classified as either a financial transaction or a non-financial transaction, depending on the nature of the asset and the transaction in question. The sale of shares or equity held by Government is a direct sale of a financial asset and would be classified as a financial transaction. A financial transaction is not deemed to be revenue or expenditure and does not impact on the General Government Balance.
Accordingly, a sale of the Government's shares in Aer Lingus would be recorded in the General Government accounts as a financial transaction, and the General Government Balance would not be improved by receipt of the sale proceeds. An increase in voted expenditure, for example, on foot of the proceeds would have a negative impact on the General Government balance. However, if the use of the proceeds were classified as a financial transaction, then neither the receipt nor use of the proceeds would impact on the General Government Balance.
